be derived from a successful implementation of the relationship banking concept. Stability of the client base is enhanced. Profitability is improved through client base stability, because the extension of additional services to existing clients is a more cost effective process than the acquisition of new customers. Further, profitability is improved by concentrating operations in the most profitable marketing segments.
Relationship banking is an attempt to avoid a misidentification of the line of business in banking. It may not be the right answer, but it is being considered for the right reasons.
Based upon the findings of this study, the answer to the research question investigated is a resounding yes--in the short-run. In the long-run, however, the answer is somewhat more difficult to formulate. While relationship pricing may be effective as a means of promoting relationship banking, and while it may prove to be legal in the short-run, long-run difficulties may result. In the long-run, it is possible that relationship banking could be interpreted as a violation of civil rights statutes. This latter eventuality could be hastened, if, in any general move toward relationship banking, few if any institutions target the less affluent and less profitable accounts. While the proponents of relationship banking claim that all segments may be targeted, the criteria for the selection of segments results in a de facto exclusion from consideration of this customer group.
The eighth full year of regulatory revision (deregulation) in banking and finance in the United States (US) was completed at the end of 1989. In the spring of 1990, there exists a significant level of blurring of the functions of the major players in the industry, as well as the presence of many new players. As an example, the activities of commercial banks and investment-type institutions overlap to a greater extent than was true prior to regulatory revis...